IMF Study Blames Slow Recovery On Household Debt To Income Ratio

This article summarizes a report by the IMF on the global economic slowdown.  Its major conclusion is that nations that ran up the highest household debt to income ratios suffered the steepest declines in consumption and GDP.  It also raises questions about the relationship between the financial crisis and the recession.  The financial crisis did not cause the recession.  In fact, the financial crisis was the result of rapid growth in household debt.  The IMF makes the case for government stimulus programs to restore demand and for programs that enable households to service their debt. The HAMP program operated, by the US Treasury, failed to adequately deal with the debt overhang, and it led to forced sales of homes and a huge fall in the value of the largest asset held by most households.